Edited version of your written advice

Authorisation Number: 1012765943024

Ruling

Subject: Residency

Question and answer

Are you resident of Australia for tax purposes from the date you left Australia?

No

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

The scheme has commenced

Relevant facts and circumstances

Your country of origin is Australia and you are an Australian citizen.

You are not a citizen of any other country.

You departed Australia in 20XX to work overseas. You held some casual positions for a short period when you first arrived in country X, and then worked with the same employer for most of the time you were there.

You lodged tax returns in country X.

You travelled on a working holiday visa and stayed in country X for two years. You lived in a furnished house during your time living and working in country X.

When your visa expired you travelled overseas for four months.

During your time travelling you applied for work in country Y.

While waiting to hear about a position in country Y you spent X months in Australia working and lived at your parents' home.

You received a job offer to work in country Y and almost immediately moved there. Your contracts are for X monthly contracts which is standard procedure for your employment industry in country Y.

You have been working with the same employer for more than a year and they provide you with accommodation.

You do not have any assets in country Y as you rent your car and do not hold bank accounts due to security reasons.

You hold a business visa to work in country Y.

You attend language classes and go to gym classes in country Y.

You have never been a Commonwealth Government of Australia employee.

You have a partner who lives in the country X and is planning to move to country Y.

You have not decided on a return date to Australia.

Since leaving in Australia you have made the following return trips to Australia:

• X weeks for a holiday

• Y weeks - worked waiting for employment offer in country Y

• Z weeks for a holiday and an unplanned medical procedure which extended the original departure date

• Z weeks - visit family and friends

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: 

• the resides test,

• the domicile test,

• the 183 day test, and

• the Commonwealth superannuation fund test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(i) physical presence in Australia

(ii) nationality

(iii) history of residence and movements

(iv) habits and 'mode of life'

(v) frequency, regularity and duration of visits to Australia

(vi) purpose of visits to or absences from Australia

(vii) family and business ties with Australia compared to the foreign country concerned, and

(viii) maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

You first left Australia on a working holiday visa with the intention to live and work overseas in country X. You spent two years in country X then travelled and spent X months in Australia before moving overseas again to country Y.

Although you spent more days outside of Australia due to working overseas, this does not preclude you from being an Australian resident as no one single factor is necessarily decisive, as mentioned above.

(ii) Nationality

Your country of origin is Australia and you are a citizen of Australia.

(iii) History of residence and movements

You left Australia and lived in country X for two years.

You spent time travelling overseas for Y months.

You then returned to Australia for X months.

You left Australia to take up employment in country Y and have been there since.

(iv) Habits and 'mode of life'

In country X you worked for the same employer and lived in rental accommodation.

You are now living in employer provided accommodation in country Y. You attend classes and attend the gym.

(v) Frequency, regularity and duration of visits to Australia

Since leaving in Australia you have made the following return trips to Australia:

• X weeks for a holiday

• Y weeks - worked waiting for employment offer in country Y

• Z weeks for a holiday and an unplanned medical procedure which extended the original departure date

• Z weeks - visit family and friends

(vi) Purpose of visits to and absence from Australia

The purpose of your absence from Australia is for employment opportunities.

(vii) Family, business and financial ties

Family

Your parents live in Australia.

You have a partner who lives in country X who is planning to move to country Y.

Business or economic

You left Australia to work in country X on a working holiday visa. You stayed in country X for two years until the expiry of your visa.

You are now working in country Y and have been on X monthly renewed contracts with your employer since moving there.

Your Australian assets include two bank accounts.

You do not have any assets overseas as you rent your car in country Y and do not have bank accounts due to security issues.

(viii) Maintenance of a place of abode in Australia

You do not own any properties in Australia.

Summary of the resides test

In your case, you will not be residing in Australia for the purposes of the resides test for the following reasons:

• You have been working overseas for nearly Z years other than Y weeks when you returned to Australia awaiting your employment offer in country X.

• You are overseas for an indefinite period of time.

• Your only assets in Australia are two bank accounts.

Other residency tests

Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test.

2. The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

In this regard, paragraph 21 of Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) states that:

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

Your country of origin is Australia and you are an Australian citizen, therefore your domicile remains Australia.

Therefore you will be a resident of Australia unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

Permanent place of abode

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives (paragraph 12 of IT 2650).

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere (paragraph 14 of IT 2650).

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode;

i. the intended and actual length of the taxpayer's stay in the overseas country;

ii. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

iii. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

v. the duration and continuity of the taxpayer's presence in the overseas country; and

vi. durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Paragraph 24 of IT 2650 instructs that the weight of each factor will vary with individual circumstances and no single factor is decisive. However, 'greater weight should be given to factors (c) the establishment of a home outside Australia, (e) the duration and continuity of the individual's presence in the overseas country and (f) the durability of association that the individual has with a particular place in Australia than to the remaining factors'.

In your case, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia for the following reasons:

• You lived in a rental property in country X for two years.

• You have been working overseas for nearly Z years other than a period of Y weeks when you were in Australia awaiting your employment offer in country Y.

• Your visits back to Australia are minimal and for holiday purposes only.

• You are intending to stay in country Y for the foreseeable future and do not have plans to return to Australia.

As the Commissioner is satisfied that you have a permanent place of abode outside Australia, you are not a resident of Australia for income tax purposes under this test.

3. The 183-day test

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here.

You were not present in Australia for more than 183 days in the relevant years. Thus, you are not a resident under this test.

4. The superannuation test 

You will be a resident if you are eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or you are the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

You were not a member of a relevant superannuation scheme and not an eligible employee for the purposes of the Superannuation Act 1976.

Therefore, this test does not apply to you.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not an Australia resident for income tax purposes.

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